industry outlook, innovation & careers€¦ · industry outlook, innovation & careers phil...

1

@WeRRestaurants

/RestaurantDotOrg

/NationalRestaurantAssociationwww.restaurant.org

Industry Outlook, Innovation & Careers

Phil Kafarakis

Foodservice Ashore SolutionsJune 8 – 11, 2015

2

DEFINITION:

“Restaurant Industry”

All meals/snacks prepared away from home,

including all takeout meals and beverages.

3

The

Industry

Mosaic

Industrial plants Hospitals and nursing homes

Schools and universitiesAirlines

Recreation and sports centers

4Source: Who Works in the U.S. Restaurant Industry? A NationwideSurvey of the Restaurant Workforce, National Restaurant Association education Foundation Special Report 2014

Cornerstone of Career and Entrepreneurial Opportunities

7/10Employees

will stay until retire

5

9 in 10 = Proud!

8 in 10 = a place where people of all backgrounds can open their own business.

Cornerstone of Career and Entrepreneurial Opportunities

58% of first-line supervisors/managers of food preparation and

service workers in 2013 were women, 13% were black or African-

American and 19% were of Hispanic origin.

6

The

Supply

Chain

7

Employees 14 million

Restaurant Industry 2015

8

National Economy to Post Strongest Job Growth Since 1999

Total U.S. Employment – Historical and Projected Growth Rates

Source: Bureau of Labor Statistics; National Restaurant Association projections

1.8%

1.1%

-0.6%

-4.3%

-0.7%

1.2%

1.7% 1.7%

1.9%2.2%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*

Projected

9Source: Bureau of Labor Statistics

National Average: 2.0% More Jobs

Economy is Now 2.8 Million Jobs Above Pre-Recession Peak35 States Have More Jobs Than Before the Jobs Losses Started in Feb. 2008

3% or more

1% to 2.9%

0% to 0.9%

-0% to -1.9%

-2% or fewer

DC

9

+28%

-4%

10

Restaurants Added More Than 360,000 Jobs During 2014Eating and Drinking Place Employment – Change from previous month

16,500

32,10030,100 28,500

33,500

28,600

9,500

30,80032,600

43,300

31,500

43,600

0

10,000

20,000

30,000

40,000

50,000

Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14

Source: Bureau of Labor Statistic; figures are seasonally-adjusted

11

Top 5 States:Restaurant Job Growth 2015 to 2025

Arizona

Florida

Texas

Georgia

Utah

23.8 %

22.4

22.0

21.1

21.0

PERCENT CHANGE

Source: National Restaurant Association

12

Restaurants Are More Likely to Employ Part-Time WorkersDistribution of Employees by Work Schedule – Restaurants vs. Total U.S. Workforce

Full-Year /

Full-Time

43%

Full-Year /

Part-Time

27%

Part-Year /

Full-Time

7%

Part-Year /

Part-Time

23%

Full-Year /

Full-Time

69%

Full-Year /

Part-Time

12%

Part-Year /

Full-Time

9%

Part-Year /

Part-Time

10%

Restaurants Total U.S. Workforce

Full-Year = 50 or more weeks per year

Full-Time = 35 or more hours per week

Source: Bureau of Labor Statistics

13

Overview

14

Restaurant Industry 2015

Annual

Sales$709 billion

15

Locations 1 million

Restaurant Industry 2015

16

45 Years of Restaurant Industry Sales (1971-2015)

Source: National Restaurant Association

6.4%Compound

annual

growth rate

17

17

ItemCompound Annual

Growth Rate

Restaurant Industry Sales 4.0%

Inflation

–General 2.3%

–Grocery 2.5%

–Menu Prices 2.9%

–Wholesale Food 3.6%

Employment

–Total 0.5%

–Eating & Drinking Places 1.9%

A Decade Perspective2004 - 2014

Source: Bureau of Labor Statistics, National Restaurant Association

18

2014 2015

$683 billion$709 billion

+3.8%

Total Restaurant Industry Sales

Source: National Restaurant Association

19

2014 2015

$213 billion

$220 billion

2.9%

19

Tableservice Restaurant Sales

Source: National Restaurant Association

20

2014 2015

$192 billion$201 billion

4.3%

Limited-Service Restaurant Sales

Source: National Restaurant Association

21

Snack and Nonalcoholic Beverage Bar Sales

2014 2015

$31.2 billion$32.8 billion

5.2%

Source: National Restaurant Association

22

RegionPopulation

GrowthEmployment

Growth

West South Central 1.3% 2.8%

Mountain 1.6 2.5

South Atlantic 1.3 2.4

Pacific 0.9 2.3

East South Central 0.6 2.0

Middle Atlantic 0.2 1.8

West North Central 0.5 1.7

New England 0.5 1.7

East North Central 0.2 1.7

U.S. Average 0.8 2.3

The Critical Role of Demographics in 2015

Source: National Restaurant Association

23

Projected Growth in Total State Population: 2012 to 2022

15% or more

10 to 14.9%

5 to 9.9%

Less than 5%

Source: Moody’s Analytics

24

International Travel and Tourism Continues to RiseInternational arrivals to the United States (in millions)

Source: U.S. Department of Commerce, Office of Travel and Tourism Industries *Projected

25

Restaurant Sales Growth in 2015 (Projected)

Source: National Restaurant Association

26

Current Restaurant Sales Remain Above 2014 LevelsSeasonally-adjusted Monthly Sales at Eating and Drinking Places (in billions)

Source: U.S. Census Bureau

$25

$30

$35

$40

$45

$50

$55

Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

Mo

nth

ly S

ale

s (

in b

illio

ns

)

20082007

2006

2004

2002

2001

2003

2005

200920102011

2012

2013

20142015

27

Restaurant Operators Top Challenges

Top Challenges Facing Restaurant Operators: April 2013, April 2014, and April 2015

APRIL 2015

Government 18%

Food Costs 17

The Economy 13

Labor Costs 13

Recruiting Employees 12

APRIL 2013

The Economy 26%

Government 20

Food Costs 15

Sales Volume 15

Recruiting Employees 4

APRIL 2014

Food Costs 27%

Government 27

The Economy 21

Sales Volume 9

Recruiting Employees 4

Source: National Restaurant Association, Restaurant Industry Tracking Survey

28

Wholesale Food Prices Post Sustained GrowthAnnual Growth in Producer Price Index – All Foods

Source: Bureau of Labor Statistics *Year-to-date growth through March

7.6% 7.7%

-3.8%

4.9%

8.1%

2.2% 2.2%

5.5%

1.4%

-6%

-3%

0%

3%

6%

9%

2007 2008 2009 2010 2011 2012 2013 2014 2015*

29Source: U.S. Drought Monitor

30

Summer

2015

Temperature

Outlook

Above Normal

31

2014 Individual Commodities Posting Strong Growth

Pork

Eggs

+ 20%

+18%

Butter +37%

Beef and Veal + 19%

Source: Bureau of Labor Statistics, National Restaurant Association

32

Menu Price Growth Remains ModerateAnnual Growth in Consumer Price Index – Food Away From Home

Source: Bureau of Labor Statistics *Year-to-date growth through March

3.6%

4.4%

3.5%

1.3%

2.3%

2.8%

2.1%

2.4%

3.0%

0%

1%

2%

3%

4%

5%

2007 2008 2009 2010 2011 2012 2013 2014 2015*

33

Above 102 in 6th Consecutive MonthsValues Above 100 = Expansion, Values Below 100 = Contraction

Source: National Restaurant Association

96

97

98

99

100

101

102

103

104

Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15

Restaurant Performance Index (RPI)

34

$30,000

$35,000

$40,000

$45,000

$50,000

$55,000

$60,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Real Household Income Remains Down 8% From its Recent High in 2007

Real Median Household Income (adjusted for inflation in 2013 dollars)

2013: $51,939 = Only 0.4% Above 1995 Level

Source: U.S. Census Bureau

35

Disposable Income on Pace for Strongest Gain Since 2006

Real Disposable Personal Income – Historical and Projected Growth Rates

Source: Bureau of Economic Analysis; National Restaurant Association projections

4.0%

2.1%

1.5%

-0.4%

1.0%

2.5%

3.0%

-0.2%

2.5%

3.6%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*

Projected

36

0%

10%

20%

30%

40%

50%

60%

70%

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Pe

rce

nt

in L

ab

or

Fo

rce

Female Labor Force Participation at Lowest Level Since 1988Female Labor Force Participation Rate

Record High:1999 = 60%

Source: Bureau of Labor Statistics

2014=

57%

37

$2.00

$2.50

$3.00

$3.50

$4.00

$4.50

Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-14

Pri

ce p

er

gallo

n

Gas Prices Fell Sharply in the Last Half of 2014 Average price per gallon for regular gasoline

Down $1.49 Since End of June

Jan-15

Source: U.S. Department of Energy, Energy Information Administration

38

Gas and Diesel Prices Will Remain $1 Below 2014 Levels

Historical and Projected Prices for Regular Gasoline and Diesel Fuel

Source: U.S. Department of Energy, Energy Information Administration

$3.63 $3.51$3.36

$2.40

$3.97 $3.92 $3.83

$2.86

$0.00

$1.50

$3.00

$4.50

Regular Gasoline Diesel Fuel

2012 2013 2014 2015

39

Where Do Consumers Spend?

CATEGORY

PERCENT OF

TOTAL

Housing 34%

Transportation 18

Food 13

Insurance/pensions 11

Health care 7

Entertainment 5

Contributions 4

Clothing 3

Other 5

Total 100%

Source: Bureau of Labor Statistics, Consumer Expenditure Survey – 2013, National Restaurant Association

40

Auto Sales Totaled 16.5 Million Units in 2014 – Strongest Pace Since 2006U.S. Monthly Auto Sales (Seasonally-adjusted annual rates)

0

2

4

6

8

10

12

14

16

18

Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

Millio

ns

Cash for

Clunkers

Source: Auto Data

41

42

Higher-Income Households are Prime Restaurant CustomersShare of Total Restaurant Spending by Household Income Level

Less than $30,000

16%

$30,000 - $49,999

15%

$50,000 - $69,999

15% $70,000 - $99,999

18%

$100,000 or more

36%

Source: Bureau of Labor Statistics 2013 data

4343Source: National Restaurant Association

Restaurant Industry’s Share

of the Food Dollar

44

Percentage of adults NOT eating on-premises at restaurants as often as

they would like

Pent-Up Demand for Restaurants Remains High

Source: National Restaurant Association

September

2013

October

2007

May

2015

47%31% 38%All Adults

Percentage

Point Change

2007 vs 2015

+7

45

A Growing Restaurant Opportunity

30% of consumers regularly shop for groceries at four or more stores

Source: Ipsos, 2015

4646Source: National Restaurant Association, National Household Survey

47

Consumer

Trends

48

Americans Love RestaurantsConsumers who say they enjoy going to:

Restaurants Grocery stores

90% 66%

Source: National Restaurant Association, 2015 Restaurant Industry Forecast

49

Unfilled Demand for Restaurant ServicesRemains Elevated

Approximately two out of five adults are NOT dining on-premises or using take-out as often as they would like

Source: National Restaurant Association, 2014

50

Quality Time

Consumers who say dining out is a better

use of time than cooking and cleaning up.

Source: National Restaurant Association, 2015 Restaurant Industry Forecast

51

Consumers who say restaurants provide tastes

and flavors that aren’t easily duplicated at home.

Unique Experiences

Source: National Restaurant Association, 2015 Restaurant Industry Forecast

52

Top Attributes for Choosing

a Restaurant

Good service

Food quality

Good value

Favorite items on the menu

Convenient location to home or work

Healthy menu items

Source: National Restaurant Association, 2015 Restaurant Industry Forecast

53

Noticing Healthful Options

Consumers who say there are more healthful

options on restaurant menus now than two

years ago.

Source: National Restaurant Association, 2015 Restaurant Industry Forecast

54

Choosing Healthy Options

Consumers who say they are more likely to

choose a restaurant that offers healthy menu

options. Source: National Restaurant Association, 2015 Restaurant Industry Forecast

55

Actually Choosing Healthy Options

Consumers who say they are ordering more

healthful options in restaurants now than two

years ago.

Source: National Restaurant Association, 2015 Restaurant Industry Forecast

56

Opting for Local Sourcing

Consumers who say they are more likely to

visit a restaurant that offers locally sourced

food items.

Source: National Restaurant Association, 2015 Restaurant Industry Forecast

57

Eco-Friendly Matters

Consumers who say they are more

likely to visit a restaurant that offers

organic or environmentally friendly food.Source: National Restaurant Association, 2015 Restaurant Industry Forecast

58

Adventurous Palates

Consumers who say they are more

adventurous in their restaurant food

choices now than two years ago.Source: National Restaurant Association, 2015 Restaurant Industry Forecast

5959Source: National Restaurant Association, 2015 Restaurant Industry Forecast

Breakfast for DinnerConsumers who wish restaurants served breakfast items all day

60

Food

Trends

61

What’s Hot in 2015

1) Locally sourced meats and

seafood

2) Locally grown produce

3) Environmental sustainability

4) Healthful kids’ meals

5) Natural ingredients

TABLESERVICE RESTAURANTS

Source: National Restaurant Association, What’s Hot in 2015 chef survey

62Source: National Restaurant Association, What’s Hot in 2015 chef survey

6) New cuts of meat

7) Hyper-local sourcing

8) Sustainable seafood

9) Food waste reduction

10) Farm-/estate-branded items

TABLESERVICE RESTAURANTS

What’s Hot in 2015

63

1) Gluten-free items

2) Sustainable food items

3) Locally sourced produce

4) Fruit/veggie kids’ sides

5) Mini-desserts/dessert bites

LIMITED-SERVICE RESTAURANTS

Source: National Restaurant Association, 2015 Restaurant Industry Forecast

What’s Hot in 2015

64

6) Gourmet grilled cheese

7) Build-your-own items

8) Healthful kids’ meals

9) Locally sourced meat/seafood

10) Milk/juice in kids’ meals

Source: National Restaurant Association, 2015 Restaurant Industry Forecast

What’s Hot in 2015LIMITED-SERVICE RESTAURANTS

65

ALCOHOL

Source: National Restaurant Association, What’s Hot in 2015 chef survey

What’s Hot in 2015

1) Artisan spirits

2) Local beer/wine/spirits

3) Onsite barrel-aged drinks

4) Regional signature cocktails

5) Culinary cocktails

66

Movers & Shakers in 2015

Underutilized fish

Ethnic condiments

Ramen

Southeast Asian cuisine

Gourmet grilled cheese (QSR)

Mini-desserts (QSR)

WARMING TRENDS

Source: National Restaurant Association

67

What’s Hot in 2015

Local sourcing

Environmental sustainability

Nutrition/Kids’ nutrition

Ethnic cuisines and flavors

UMBRELLA TRENDS

Source: National Restaurant Association

68

Perennial Favorites in 2015

1) Barbecue 6) Oatmeal

2) Italian cuisine 7) Comfort foods

3) Fried chicken 8) Fruit desserts

4) French toast 9) Pulled pork

5) Frying 10) Chicken wings

TABLESERVICE RESTAURANTS

Source: National Restaurant Association, What’s Hot in 2015 chef survey

69

Perennial Favorites in 2015

1) French fries 6) Hamburgers

2) Poultry items 7) Side salads

3) Bacon 8) Onion rings

4) Bottled water 9) Soft drinks

5) Beef items 10) Pizza

LIMITED-SERVICE RESTAURANTS

Source: National Restaurant Association, 2015 Restaurant Industry Forecast

70

Yesterday’s News in 2015

1) Insects

2) Foam/froth

3) Gazpacho

4) Bacon-flavored chocolate

5) Popovers

TABLESERVICE RESTAURANTS

Source: National Restaurant Association, What’s Hot in 2015 chef survey

71

1) Energy drinks

2) Veggie burgers

3) Bagels

4) Sweet potato fries

5) Pretzel bread

LIMITED-SERVICE RESTAURANTS

Source: National Restaurant Association

Yesterday’s News in 2015

72

Movers & Shakers in 2015

Kale salads

Greek yogurt

Gluten-free cuisine

Hybrid desserts

Pretzel bread (QSR)

COOLING TRENDS

Source: National Restaurant Association

73

Ethnic Cuisines 2015

Most known and frequently eaten = Italian, Mexican and

Chinese

Least known and frequently eaten = Ethiopian,

Brazilian/Argentinian and Korean

Most common dining out = Sushi/sashimi, Thai,

Vietnamese, Brazilian/Argentinian, Greek, Southeast Asian

and Mexican

Most common takeout = Chinese, ethnic condiments,

Ethiopian, Mexican, Italian, ethnic non-alcoholic drinks and

sushi/sashimi

Source: National Restaurant Association, 2015

74

Ethnic Cuisines 2015 85% = prefer to eat ethnic cuisine in a restaurant focused on that

cuisine.

75% = like it when restaurants with mainstream menus also serve

ethnic cuisine.

66% = eat a wider variety of ethnic cuisines now than five years

ago.

29% = tried a new ethnic cuisine in the last year.

25% = like trying unconventional ingredients.

1/3 = like many dishes. 1/3 = like one or two dishes. 1/3= like the

general flavor profile.

56% = customize ethnic cuisine dishes to fit their taste.

Source: National Restaurant Association, 2015

75

Future Trends

Source: National Restaurant Association, Restaurant Industry 2020

TOP Developments : Food & Menu

There will be significant upgrades in product quality and

emphasis on “fresh.”

Local sourcing will become more prevalent.

Healthy eating will continue to grow.

There will be a greater demand for authentic items and

flavor profiles.

Fresh produce options will become more plentiful.

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Average Americans are turning into adventurous

“foodies.”

Local sourcing, environmental sustainability, and

nutrition are key menu trends.

Ethnic cuisines are becoming more mainstream.

Today’s trends will very likely also be tomorrow’s

trends.

Key Takeaways

77

Pop-Up produce stands go mainstream….

Source: Fortune June 1, 2015 Anne VanderMey

78

Technology

79

Restaurants are Extremely Labor IntensiveAverage Sales per Full-Time Equivalent Non-Supervisory Employee, 2013

Source: National Restaurant Association, based on Bureau of Labor Statistics and US Census Bureau data

Eating and Drinking Places $84,000

Grocery Stores $304,000

Auto Dealers $823,000

Gasoline Service Stations $855,000

80

Labor Productivity in Restaurants Remained Flat in Recent Years

Average Annual Percent Change in Output per Labor Hour: 2003 to 2013

-0.1%

-0.3%

0.3%

1.7%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

Eating and

Drinking Places

Fullservice

Restaurants

Limited-Service

Eating Places

Total Nonfarm

Businesses

Source: Bureau of Labor Statistics

81

Smart Phone / Tablet Ownership or Usage

All Adults 70%

18-34 90%

35-44 89%

45-54 62%

55-64 60%

65+ 34%

Source: National Restaurant Association, October 2014

82

Consumers More Likely

to Use Restaurant TechnologyCompared to Two Years Ago

More Likely35%

Same40%

Less Likely13%

Don't Use12%

Source: National Restaurant Association, October 2014

83Source: National Restaurant Association, 2015 Restaurant Industry Forecast

84Source: National Restaurant Association, 2015 Restaurant Industry Forecast

85Source: National Restaurant Association, 2015 Restaurant Industry Forecast

86Source: National Restaurant Association, 2015 Restaurant Industry Forecast

87

Restaurant Technology UsagePercent of

Adults

Look up restaurant locations, directions

and hours of operation88%

Look at menus 70%

Read reviews from apps or sites like Yelp

and TripAdvisor57%

Use rewards or special deals 54%

Order takeout or delivery directly from a

restaurant’s website or branded app54%

Source: National Restaurant Association, October 2014 – Base own/use smartphone/tablet

88

Restaurant Technology Usage

Percent of

Adults

Look up restaurant nutrition information 49%

Make reservations 43%

Pay for your meal 26%

Order takeout or delivery via an aggregate

service like Seamless or GrubHub22%

Source: National Restaurant Association, October 2014 – Base own/use smartphone/tablet

89Source: National Restaurant Association, National Household Surveys

A Growing Opportunity: Mobile FoodservicePercent of adults likely to visit a food truck if offered by a favorite restaurant

59%

70%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2011 2014

90

Consumers Want Mobile Foodservice Options

Source: National Restaurant Association, National Household Survey 2014

91

Technology = Another Tool, Not Ultimate Solution

37% of consumers report technology makes restaurant visits and ordering more complicated

Source: National Restaurant Association, 2014

92

Sensors

Data

Devices Screens

Creating Demand &

Serving Convenience

Productivity & Supply-

Chain Efficiency

Restaurateurs & Technology

93

Legislative

Update

94

2015 U.S. Economic OutlookGradual Improvement Continues

INDICATOR 2014 2015

Real Gross Domestic Product 2.4% 3.4%

Real Disposable Personal Income 2.4% 3.1%

Consumer Price Index 1.7% 2.0%

Total U.S. Employment 1.9% 2.2%

Source: National Restaurant Association, projections as of December 2014

95

Issues

96

97

98

• Menu Labeling Regulations • Dietary Guidelines

• Trans Fats

99

Food & Healthy LivingImperative Committee

• Menu labelingregulations

• Dietary Guidelines• Trans Fats

Consumer transparency• Nutritional requirements

• Dietary guidelines

• Marketing

Supply-chain integrity• Food safety

• Raw material redundancies

• Country of origin

Regulatory oversight

• USDA, FDA, Health & Human Services

• Center for Science in Public Interest (consumer protection agencies)

100

“The secret sauce or too many cooks in the kitchen?”

101

Brisk SSS – 2014Q4 Best in 6 years across industry Stronger sector performance than in other retail Strong free cash flow across top 100 NRA RPI at 102.1 in November – over 100 last 14 months

Wall Street coming to the table…

102

Abundant assortment of companies with a large range of P/E and ROI Tremendous value in consolidation of the large = synergies producing fast return Emerging local concepts feeding fickle consumers and hungry for capital to grow More finance savvy than culinary leadership making decisions

Plenty on the menu…

103

Fast casual paying off BIG! Emerging local brands taking share from the “regulars” Prime real estate still available

A “foodie bubble” ?

104

Restaurant Operators Are More Optimistic about Sales GrowthOperators’ Outlook for Sales in Six Months vs. Same Period in Previous Year

49%

6%

46%

11%

50%

8%

44%

10%

47%

13%

45%

5%

40%

8%

52%

6%

57%

7%

0%

10%

20%

30%

40%

50%

60%

Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14

Higher Sales in Six Months Lower Sales in Six Months

Source: National Restaurant Association

105

Unpredictable factors that can

impact earnings... fast !

GovernmentRegulations that

are constantly changing!

Shifting consumer dynamics with pent up demand!!

Shrewd Entrepreneurs

able to capitalize!

Restaurants; the darlings of retail!

106

2015 = improving but moderate growth environment.

Real sales growth will occur for sixth consecutive year.

Job market and industry employment advances continue.

Food cost growth moderates.

More technology integration to aid productivity and boost

loyalty.

Consumers will still be managing their check and need

“nudging.”

Strong geographic variations sustained.

Over short and long term, a positive future despite

challenges.

Summary

107

NRA

Membership

108

Phil Kafarakis

Chief Innovation

&

Member Advancement Officer

@WeRRestaurants

/RestaurantDotOrg

/NationalRestaurantAssociation